NU Online News Service, April 15, 2003, 4:27 p.m. EDT – Standard & Poor’s, New York, says it will be placing some U.S. companies’ credit ratings on “CreditWatch with negative implications” because of the pension and retiree health benefits they have promised.
The federal government requires employers to set cash aside to fund defined benefit pensions, but employers can cover the cost of the retiree health benefits as they go along.
Paying for retiree health benefits can be a heavy burden on companies with large numbers of retirees, and making up for shortfalls in pension funding can also be difficult, according to S&P.
Pension funding levels have suffered at many companies in the past three years as a result of the stock market slump and falling interest rates.
Companies affected by unfunded retiree benefits obligations “are at a distinct disadvantage compared with otherwise similar companies that have better-funded retiree obligations,” S&P says.
S&P says it hopes to complete reviews of companies’ retiree benefits obligations in the next few weeks.